SEBI Gives Notice to Paytm Founder, Director on IPO Breaches

Markets regulator SEBI has issued a show cause notice to the founder and other board members of financial services company Paytm for alleged irregularities in the initial public offer (IPO) of the company brought about three years ago. In this notice, a reply has been sought for giving wrong information about the facts.

Paytm founder Vijay Shekhar Sharma was described as an employee of the company in the documents filed for this IPO, whereas he should have been placed in the category of large shareholder who can influence the company’s decisions. According to a media report, SEBI Has questioned the then directors of the company regarding this. According to stock exchange data, Sharma was reported to be a public shareholder rather than a major shareholder. It was stated in these documents that there are no investors in the category of major shareholders of Paytm. Regarding this, Paytm has said, “The company is in regular touch with SEBI regarding this matter.” Along with this, the company has said that information about this notice was given in the filing of quarterly results.

SEBI alleges that the 2.1 crore employee stock options (ESOPs) given to Sharma are in violation of its rules on providing share-based employee benefits. Under these rules, large shareholders with the ability to influence company decisions cannot own ESOPs. SEBI did not respond to Reuters’ request for comment.

Earlier this year, the Reserve Bank of India (RBI) had ordered the closure of Paytm’s banking unit Paytm Payments Bank Limited (PPBL). This was a big blow to the company. After this there was a big fall in Paytm’s shares. In the fourth quarter of the last financial year, the revenue of One 97 Communications, which runs Paytm, had declined by 2.6 percent for the first time since its listing. The company’s revenue was approximately $22.7 billion. The Financial Intelligence Unit (FIU) had imposed a penalty of over Rs 5 crore on PPBL in March. The reason for this was violations in reporting illegal amounts sent through PPBL accounts.

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